Ontario housing starts grew for the third consecutive month in February. Ontario’s seasonally adjusted and annualized home starts hit 62,000 units, up from 48,400 in January, or a 29 per cent increase.Multi family construction, which includes condos, row houses and town homes, was the biggest driver. But single detached housing also edged higher, posting better than expected activity.

“Ontario new home starts activity has exhibited a seesaw pattern in recent months suggesting the downtrend in activity since the spring of 2011 is levelling out,” said Ted Tsiakopoulos, CMHC’s regional economist. “Buoyant resale and new home market conditions since the final months of 2010, an improving economy coupled with the fear of rising rates later this year implies housing starts should move convincingly higher by the second half.”

The Toronto market was largely responsible for the big increase in Ontario.

“The condominium segment is shaping up to be the engine of growth for the construction industry in Toronto this year,” said Shaun Hildebrand, CMHC’s senior market analyst.

The strong housing start numbers come on the heels of disappointing building permit figures for January, which showed construction intentions were down by 19.5 per cent over December. Much of that was due to the volatile multiple unit segment, where large projects can have a disproportionate impact.

Those figures are expected to pick up later this year, given the volume of sales for multi-unit dwellings in the fourth quarter of 2010.

Nationally, Ontario led the way, helping starts rise by a better than expected 6.6 per cent to 181,900 units.

“Canadian residential construction activity appears to be stabilizing at a level consistent with underlying demographic demand,” said BMO Capital Markets economist Robert Kavcic. “Home sales could be challenged by higher mortgage rates and shorter amortizations which will eventually weigh on starts, but the maturing economic recovery should help.”

According to a survey of builders by the Ontario Construction Secretariat, firms in the Greater Toronto Area are the most optimistic about increased work and employment this year.

However, the optimism is not shared across the province as some hard hit cities, including southwestern Ontario’s Windsor and Sarnia area are worried about job loss ranging from auto to petrochemical industries.

“There are still some concerns about how much growth will actually occur,” said Sean Strickland, CEO of the secretariat.

A majority of builders or 55 per cent say that they expect the economy to be “somewhat good” this year, as home buying is expected to be more muted. Analysts seem to agree.

“As mortgage rates climb, home buyers are likely to jump into the market sooner rather than later to take advantage of relatively lower borrowing costs,” said Arlene Kish, principal economist at IHS Global Insight. “Overall, residential construction looks like to be plodding along, but it is not expected to make a significant contribution to growth in 2011.”